TMI Tax Updates - e-Newsletter
July 20, 2023

Case Laws in this Newsletter:

GST Income Tax Customs PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

1. Taxability of Loan Waivers: Amount not taxable on receipt changes colour when it becomes assessee’s own money

   By: Vivek Jalan

2. COMPENSATION CESS ON MOTOR VEHICLES

   By: Dr. Sanjiv Agarwal

3. SPECIAL AUDIT UNDER INCOME TAX ACT, 1961

   By: DR.MARIAPPAN GOVINDARAJAN

4. Fate of “Charitable Activities” cases u/s 2(15) in Income Tax post the Supreme Court’s judgement in the case of Ahmedabad Urban Development Authority

   By: Vivek Jalan

5. Refund of IGST cannot be withheld on mere suspicion that Assessee has availed duty drawback

   By: Bimal jain

News

1. Ms. Nivruti Rai appointed as Managing Director & CEO of Invest India

2. 3rd G20 Finance Ministers and Central Bank Governors (FMCBG) Meeting 17-18 July 2023 in Gandhinagar, Gujarat

3. Third G20 Finance Ministers and Central Bank Governors Meeting

4. DPIIT notifies Quality Control Orders for ‘Resin treated compressed wood laminates’ and ‘Insulated Flask, Bottles and Containers for Domestic Use’

Notifications

Income Tax

1. 51/2023 - dated 18-7-2023 - IT

Exemption from Taxation of gift received U/s 56(2) - any movable property, being shares or units or interest in the resultant fund received by the fund management entity, in lieu of shares or units or interest held by the investment manager entity in the original fund, pursuant to the relocation, subject to conditions - Income-tax (Thirteenth Amendment) Rules, 2023 - Amends Rule 11UAC

Law of Competition

2. S.O. 3199 (E) - dated 18-7-2023 - Competition Law

Seeks to bring in force provision of section 12 of the Competition (Amendment) Act, 2023

3. G.S.R. 518(E) - dated 18-7-2023 - Competition Law

Competition Commission of India (Director General) Recruitment Amendment Rules, 2023

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/ISD/ISD-PoD-2/P/CIR/2023/124 - dated 19-7-2023

Trading Window closure period under Clause 4 of Schedule B read with Regulation 9 of SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”) – Extending framework for restricting trading by Designated Persons (“DPs”) by freezing PAN at security level to all listed companies in a phased manner

GST

2. Methodology and Procedure - dated 19-6-2023

Competition Commission of India (Methodology and Procedure), 2023

Customs

3. Instruction No. 24/2023 - dated 18-7-2023

Suspension of Licence of Customs Broker

4. Instruction No. 23/2023 - dated 14-7-2023

E-waste (Management) Rules, 2022-Regarding release of imported consignments of Producers of 106 EEEs items (ITEW1 to ITEW27, CEEW1 to CEEW19, LSEEW1 to LSEEW 34, EETW1 to EETW 8, TLSEW 1 to TLSEW6, MDW1 to MDW10 and LIW1 to LIW2)

Highlights / Catch Notes

GST

• GST Exemption Denied for 'Isha Samskriti' as It Doesn't Qualify as Educational Institution Under Notification No. 9/2017.

  Case-Laws - AAR : Exemption form GST - Education being provided by the applicant - Running of 'Isha Samskriti' / Gurukul - The Applicant is neither providing pre-school education nor education up to higher secondary school and they are following their own curriculum. In view of the above the Applicant is not covered under the definition of “educational institution” as per Notification No. 9/2017 - AAR
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• Skill Development Services Exempt from GST Under Market Led Fee-Based Scheme; Conditions Met per Notification.

  Case-Laws - AAR : Exemption from GST - Skill Development / Vocational courses - services provided by the applicant under the Market led Fee-based Services Scheme - Since the Applicant has satisfied both the conditions of the notification, the services provided by the Applicant in the instant case is exempted. - AAR
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• Replacement Parts Under Warranty Not Subject to GST; Additional Charges Will Attract GST as per Rate Schedule.

  Case-Laws - AAR : Levy of GST - replacement of parts without consideration during the warranty period - the supply of goods without consideration in the discharge of warranty obligation is not liable to GST, However, if any additional consideration is received in respect of such supplies of goods It will be liable to GST at the rate applicable for the goods as per the rate schedule. - AAR
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Income Tax

• Section 80IA(4)(iii): Approval of Industrial Park by Central Government Requires Assessing Officer to Allow Deduction Claim.

  Case-Laws - HC : Deduction u/s 80IA(4)(iii) - approval of Industrial Park by the Empowered Committee - The objection of the AO that the Industrial Park was being developed by the partnership firm is also not factually correct, in view of the explanation offered by the Assessee and also the letter issued by the Competent Authority. Once the Central Government grants the approval, it is incumbent on the part of the AO to grant the claim of deduction. - HC
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• High Court Invalidates Assessment Order u/s 153C for Breach of Natural Justice; Orders Fresh Process.

  Case-Laws - HC : Validity of assessment order passed u/s 153C r.w.r. 144 - breach of principles of natural justice - the AO had put the petitioner on an extremely tight leash. AO expected the petitioner to gather information for six AYs within two days, which, by any yardstick, was not a practical timeframe. - AO directed to carry out a fresh exercise - HC
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• Court Rules 13.5% Loan Interest from Associated Enterprise Comparable to 14.55% Prime Rate in Transfer Pricing Case.

  Case-Laws - AT : TP Adjustment - rate of interest on loan availed from AE - when the prime lending rate itself had increased over the years and stood at 14.55% for the relevant period, the comparable rate of interest could not be considered at erstwhile rates in a dynamic interest rate environment. Hence, the interest rate of 13.5% paid by the assessee to its AEs being comparable to the prevailing PLR cannot be said to be excessive. - AT
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• Section 115BBE Not Applicable to Surrendered Income from Excess Stock in Tax Survey, Rules Commissioner of Income Tax (Appeals).

  Case-Laws - AT : Addition u/s 69B - higher rate of tax u/s 115BBE - excess stock surrendered during the course of survey - There is no infirmity in the finding of Ld. CIT(A) rightly holding that the provision of section 115BBE are not applicable on the surrendered income on account of excess stock valuing found during the course of search. - AT
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• Foreign Travel Expenses for Securing Donations Allowable Under Income Tax Act Section 11 for Charitable Purposes.

  Case-Laws - AT : Exemption u/s 11 - disallowance of expenditure incurred on foreign travel - Expenditure for obtaining the donations from the various donors who were stationed abroad - The donations received are utilized for charitable purpose which is never doubted by the AO, the foreign travel expenses incurred for obtaining the above said donations is to be allowed as an expenditure - AT
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• Court Deletes Additions on Share Premium Allotment; Valuer's Disclaimer Not a Valid Reason u/s 56(2)(viib.

  Case-Laws - AT : Addition u/s 56(2)(viib) - Value of share premium received on allotment of 31248 shares - Valuation report obtained from the merchant bankers even they have issued a limitations and warrantees to the valuation report. Therefore, the disclaimer of a valuer cannot be a basis for disallowing the proper allotment of shares. It is not a bar on the assessee to issue shares with a premium as per companies Act. - Additions deleted - AT
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Customs

• Court Overturns Rejection of Request to Convert Shipping Bills Due to Reasonable Explanation for Initial Omission.

  Case-Laws - AT : Conversion /amendment of the shipping bills into drawback shipping bills - the appellants have submitted that they had inadvertently omitted to file the declaration that the shipping bills are drawback shipping bills - appellant has given plausible explanation for the omission. The rejection of request for conversion on this ground cannot sustain and requires to be set aside. - AT
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• Customs Broker License Revocation Overturned Due to Insufficient Evidence on Alleged IGST Drawback Violations under CBLR 2018.

  Case-Laws - AT : Revocation of customs broker licence - enabling certain persons to avail ineligible drawback and refund of IGST - What we see here are several loose threads - loose threads that do not curtain off the threshold ingress but, at the same time, these loose threads have been twisted together to form a noose that does not hold - the finding of the licensing authority that obligation under regulation 1(4), 10(d) and 10(n) of Customs Brokers Licensing Regulations, 2018 have been violated by the appellant, cannot be concurred upon - AT
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• Importer Cleared of Misdeclaration Allegations for Vietnam Robusta Coffee; Accurate Declaration and Compliance Confirmed.

  Case-Laws - AT : Misdeclaration of goods - Import of Coffee Husk/Bits or Robusta Coffee Beans? - It is an admitted fact that the importer sought bulk import of Vietnam Robusta Coffee and entire documents including Bill of entry shows proper declaration. When permission was given for import of Vietnam Robusta Coffee, percentage of constituents like Beans, husk and skins were not mentioned. In the absence of any such condition, no allegation of mis-declaration can be alleged at the time of import. - AT
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Indian Laws

• Promissory Note Validity Affirmed: Different Ink for Creditor's Name and Date Isn't Material Alteration Without Evidence.

  Case-Laws - HC : Validity of promissory notes - promissory notes are executed for a valid consideration or not - merely, because a different ink is used in respect of the name of the creditor and date of the instruments, we cannot come to a conclusion that the Negotiable Instrument is vitiated by material alteration in the absence of any plea or independent evidence in support of the same. - HC
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Service Tax

• CESTAT clarifies services not listed in Rule 3(1) of Export of Services Rules, 2005 qualify for CENVAT Credit refund.

  Case-Laws - HC : Refund of unutilised CENVAT Credit - intermediary services or not - POPOS Rules - export of services - The learned CESTAT has rightly concluded that all services except those specifically mentioned in Rule 3(1) of the Export of Services Rules, 2005 are covered within the scope of Export of Taxable Services. The Adjudicating Authority had clearly misread the said Rule - HC
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Central Excise

• Interest on delayed refunds starts from the Appellate Authority's order per Section 35FF, not application date per 11BB.

  Case-Laws - HC : Interest on an asserted delay in disbursal of refund - the irresistible conclusion arrived at that interest on delayed refund is clearly dependent upon the making of a formal application as stipulated by Section 11B of the 1944 Act. - Section 35FF thus indicates that interest would commence from the date of the order of the Appellate Authority as distinct from the making of an application which is prescribed to be the starting point insofar as Section 11BB of the 1944 Act is concerned. - HC
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• Appellant's Retraction of Statements in CENVAT Credit Fraud Case Dismissed; Claims of Coercion Deemed Afterthought.

  Case-Laws - AT : Fraudulent passing of CENVAT Credit - Retraction of the statement - The appellant has now taken a stand that the statements recorded were taken under threat or coercion and hence the same cannot be relied upon. The said contention is to be rejected outrightly as the same appears to be just an afterthought as it has never been taken earlier. - AT
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• CENVAT Credit Eligible for Factory Setup Services Despite 2011 Exclusion u/r 2(l) of CENVAT Credit Rules, 2004.

  Case-Laws - AT : CENVAT Credit - input services or not - services availed for ‘setting up of a factory’ - even if the word ‘setting up’ is specifically excluded from the definition of ‘input service’, w.e.f. 01.04.2011, such services used in setting up of the plant would still qualify as an ‘input service’ as per Rule 2(l) of CCR, 2004. - AT
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VAT

• Assessing Authority Can Request Records and Verify ITC; Assessee Must Prove Authenticity of ITC Claims.

  Case-Laws - HC : Rejection of refund claim in respect of input tax credit (ITC) - The Assessing Authority is duly empowered to call for the records and to verify the ITC as claimed. The onus to establish the genuineness of the ITC rests with the assessee. - It is well-settled that in case mala fides are alleged, the same has to be specifically pleaded with full particulars. - HC
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Case Laws:

• GST

• 2023 (7) TMI 755
  Exemption form GST - Education being provided by the applicant - Charitable institution or not - Entry No. 57 of Notification No. 9/2017-Integrated Tax (Rate) dated 28th June 2017 - HELD THAT:- As per entry 1 of the Notification No. 9/2017-Integrated Tax (Rate) dated 28th June 2017, exemption is given only if the following conditions are satisfied.- i. The entity providing services should be registered under section 12AA or 12AB of the Income-tax Act, 1961; ii. And the services provided by that entity should be by way of charitable activities . The Applicant has stated that they are registered under section 12AB of the Income-Tax Act 1961 and they have submitted a copy of order for registration in Form No. 10AC supporting the same. Thus the Applicant has satisfied the first condition. The Applicant has stated that Isha Samskriti is a gurukul style of residential school where subjects like Sanskrit and English language, Indian classical music (Carnatic and Hindustani), Indian classical dance( Bharatnatyam and other forms), Kalaripayattu, Yoga and basic arithmetic are taught and also extracurricular activities including football, volleyball and treks. They are just teaching these subjects as any other subjects in any normal residential schools but with a difference that the subjects taught here are not the same - Applicant also states that once the student completes 10 years of education (or till they attain 18 years), they can become professional dancers, musicians or yoga/kalaripayat teachers, but does not talk anything about being spiritual. In view of the above, it is observed that the Applicant is not providing any services relating to advancement of religion, spirituality and yoga. Hence, the Applicant has failed to prove that the services provided by them through Isha Samskriti , a gurukul style of residential school does not qualify to be charitable activities as defined in the notification and therefore not eligible to claim exemption as per entry 1 of the Notification No. 9/2017-Integrated Tax (Rate) dated 28th June 2017. Whether the Education provided by the applicant is exempt under Entry No. 57 of Notification No.9/2017-Integrated Tax (Rate) dated 28th June 2017? - HELD THAT:- The Applicant states that Isha Samskriti is a residential school with its own curriculum which is in line with Bharatiya tradition of gurukulas. The Applicant is neither providing pre-school education nor education up to higher secondary school and they are following their own curriculum. In view of the above the Applicant is not covered under the definition of educational institution as per Notification No. 9/2017-Integrated Tax (Rate) dated 28th June 2017 and hence cannot claim exemption as per entry no. 69 of the same notification.

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• 2023 (7) TMI 754
  Exemption from GST - Skill Development / Vocational courses - services provided by the applicant under the Market led Fee-based Services Scheme - exemption under entry 69 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 - HELD THAT:- The applicant states that they have been operating the platform Scaler an online transformative upskilling platform which aims to enhance the skills of working tech professionals; that NSDC has come up with a new scheme by name market led Fee-based services (hereinafter referred to as scheme ) and the Applicant has entered into an agreement with NSDC to execute the above scheme and hence they are now an Approved Training Partner of NSDC. As per the Entry 69 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017, the following conditions have to be satisfied by the applicant to claim exemption on the services provided by them: i. They have to be a training partner approved by the National Skill Development Corporation, ii. Services provided should be in relation to any other Scheme implemented by the National Skill Development Corporation. The Applicant has stated that he is an approved training partner of National Skill Development Corporation and has submitted a copy of the certificate from NSDC certifying the same. Thus, the applicant has satisfied the first condition - The Applicant has also stated that they have entered into an agreement with NSDC for executing the Market led Fee-based Services scheme which is introduced and implemented by the NSDC. Thus, the applicant has satisfied the second condition also. Since the Applicant has satisfied both the conditions the services provided by the Applicant in the instant case is exempted.

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• 2023 (7) TMI 753
  Classification of goods - rate of tax - marine propellers, stern tube set, rudder set, SS propellers shaft, MS shaft for couplings and intermediate and cutlass rubber bushes - parts of fishing / floating vessels - classifiable under HSN 8902 or not - applicability of Sl.No. 252 of the 1st schedule or Sl.No. 371 of the 3 rd schedule - replacement of parts during the warranty period constitutes supply under GST or not - input tax credit on the purchase of raw materials, as the manufactured products - HSN code of cutlass rubber bush . HELD THAT:- It is an admitted fact that the. Marine Propellers; Rudder Set, Stem Tube Set, SS Propeller Shaft and MS Shah are classifiable under Customs Tariff Headings 8487 - Ships or boats propellers and blades therefor; 7325 - Rudders for ships or boats; 7304 - Tubes, pipes and hollow profiles of iron; 7222 - Other bars and rods of stainless steel and 7215 - Other bars and rods of iron or non-alloy steel and attracts GST at the rate of 18% as per entry at Sl. Nos. 371, 237, 218, 209 and 204 respectively of Schedule III of Notification No. 01/2017 Central Tax (Rate) dated 28.06,2017. Ships, boats and floating structures are classifiable under Chapter 89 of the Customs Tariff Act, 1975. CTH 8901 covers Cruise ships, excursion boats, ferry boats, cargo ships, barges and similar vessels for the transport of persons or goods; 8902 covers Fishing vessels, factory ships and other vessels for processing or preserving fishery; 8904 covers Tugs and pusher crafts; 8905 covers Light vessels, fire-floats, dredgers, floating cranes and other vessels; 8906 covers other vessels including warships and lifeboats other than rowing boats and 8907 covers other floating structures and arc liable to GST at the rate of 5% as per entries at SI. Nos. 246, 247, 248, 249, 250 and 251 respectively of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017. Further as per entry at Sl. No. 252 of Schedule I of Notification No 1/2017-CT (Rate) dated 28.06.2017 the parts of goods of Headings 8901, 8902, 8904, 8905, 8906, and 8907 falling under any chapter attracts GST at the rate of 5%. Whether the replacement of parts without consideration during the warranty period, constitutes a supply under the CGST Act, 2017? - HELD THAT:- A warranty is a return guarantee issued to the purchaser of the goods by its manufacturer promising to repair or replace them, if necessary, within a stipulated period. If the goods are supplied with a warranty the consideration received as part of the original supply (includes the consideration for the promise to repair or replace. Hence separate consideration is not charged for warranty replacement. The supply of goods for warranty replacement is incidental to the original supply and the value of the supply made earlier includes the charges for the warranty supply also. Therefore, the supply of goods without consideration in the discharge of warranty obligation is not liable to GST, However, if any additional consideration is received in respect of such supplies of goods It will be liable to GST at the rate applicable for the goods as per the rate schedule. Whether they are eligible to avail of 18% input tax credit on the purchase of raw materials, as the manufactured products are taxable at the rate of 5%? - HELD THAT:- As the output supply made by the applicant is liable to GST though at a lower rate and not exempted the applicant is eligible to avail of the credit of tax paid on inputs, input services and capital goods subject to the conditions and limitations prescribed under Sections 16, 17 and 18 of the CGST Act, 2017 and the relevant rules made thereunder. Classification of Cutlass Rubber Bush under the Customs Tariff - HELD THAT:- Cutlass Rubber Bush is an article manufactured from vulcanized rubber. Rubber and articles thereof are classifiable under Chapter 40 of the Customs Tariff. Customs Tariff) Heading 4016 covers other articles of vulcanized rubber other than hard rubber and 4016 99 60 pertains to rubber bushes. Therefore, Cutlass Rubber Bush is classifiable under CTH 401 6 99 60 and is liable to GST at the rate of 18 % [CGST - 9% + SGST - 9%) as per entry at SI. No. 123 A of Schedule III of Notification No. 01/2017 Central Tax (Rate) dated 28.06.2017. However, parts of goods of Heading 8901, 8902, 8904, 8905, 8906 or 8907 falling under any chapter of the Customs Tariff attract GST at the rate of 5% [CGST - 2.5% + SGST - 2,5%] as per entry at SI. No. 252 of Schedule I of Notification No. 01/2017 Central Tax (Rate) dated 28,06.2017. Therefore, if the Cutlass Rubber Bush is supplied for use as parts of goods of Heading 8901, 8902, 8904, 8905, 8906 or 8907 the same is liable to GST at the rate of 5% as per the said entry of the notification.

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• Income Tax

• 2023 (7) TMI 752
  Deduction u/s 80IA(4)(iii) - approval of Industrial Park by the Empowered Committee - development of the Industrial Park by an individual or by the partnership firm - objection of the AO that the Industrial Park was being developed by the partnership firm - HELD THAT:- The Industrial Park was commissioned in September 2006. The material on record indicates that, on the basis of an erroneous State Government Report about the ownership of the property in which the Industrial Park was constituted, the Ministry of Commerce and Industry rejected the approval vide its letter dated 4th March 2009. It was the same letter which was found during the survey action and on the basis of which the claim for deduction made by the Assessee was rejected by the AO. Prior to the search and survey action, the Assessee had applied for a Review of the rejection to the Empowered Committee on 24th April 2009. The Empowered Committee, after reconsideration of the earlier rejection, had granted approval for three units on 11th June 2002 to Mr. S. Balan, the Assessee, which was effective from 12th May 2006. The objection of the AO that the Industrial Park was being developed by the partnership firm is also not factually correct, in view of the explanation offered by the Assessee and also the letter issued by the Competent Authority. Once the Central Government grants the approval, it is incumbent on the part of the AO to grant the claim of deduction. As decided in Income Tax Appeal [ 2019 (2) TMI 2083 - BOMBAY HIGH COURT] Section 80IA(4) of the Act recognizes deductions to the assessee who is an undertaking which develops and operates or maintains and operates and Industrial Park. The assessee fulfilled the said requirement as also the other procedural requirement laid down in the scheme. Rule 18C(i) itself as noted provided that the benefit would be available to an undertaking which begins to develop such Industrial Park. In the present case, the assessee had already developed the Industrial Park and as many as 21 units were already operational as admitted by the revenue. These units were sold during the assessment year in question. The profit arising out of such sale was accounted for in the said year and offered to tax. It was therefore, that the assessee was entitle to deduction in respect of such profit - Decided in favour of assessee.

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• 2023 (7) TMI 751
  Validity of assessment order passed u/s 153C r.w.r. 144 - breach of principles of natural justice -Petitioner was accorded shorter period to respond to notices - HELD THAT:- The petitioner drew the Assessing Officer s attention to the fact that via notice dated 16.03.2023, 30 days time had been granted to file the return.Unfortunately for the petitioner, the AO passed the impugned assessment orders dated 28.03.2023, without granting the time sought for by the petitioner. Although representations were made, thereafter, by the petitioner for each of the AYs on 12.04.2023, to refrain from initiating penalty proceedings, there has been no movement in the matter. Given this position, we are of the view that the AO had put the petitioner on an extremely tight leash. AO expected the petitioner to gather information for six AYs within two days, which, by any yardstick, was not a practical timeframe. We are inclined to set aside the impugned assessment orders. Decided in favour of assessee.

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• 2023 (7) TMI 750
  Disallowance on warehouse rent expenses - HELD THAT:- ITAT confirmed that disallowance on account of warehouse rent being excessive payment was rightly deleted by the CIT(A) as the assessee has given the details related to warehouse expenditure on rent thereby filing the details of related to entry/payment of the corresponding receipts along with cheques. CIT(A) has taken cognizance of the same referring to the bills and invoices towards warehouse rent and recipient as party has already paid due tax thereon. Therefore, ground of Revenue s appeals are dismissed. Addition of repairs and maintenance - HELD THAT:- ITAT confirmed that the said party and the assessee s books certain repair and maintenance was carried out as per the bill dated 01.03.2010 and 11.03.2010. The payments were made after deducting TDS. The parties directly confirmed the said charges while replying notice u/s133(6) of the act. Thus, AO has totally ignored the evidences placed before him and, therefore, the CIT(A) rightly deleted this addition Addition of interest expenses - HELD THAT:- ITAT confirmed that CIT(A) did not agree with the view of the Assessing Officer that the said addition was required to be made as there was no case made out on facts and in law to invoke provisions of section 36(1)(iii) of the Act and making any disallowance. In arriving at such finding, the Commissioner of Income Tax did not make any error. He relied on various decisions. The finding was confirmed by the Tribunal. All the concurrent findings are arrived at by the appellate Commissioner and the Income Tax Appellate Tribunal in favour of the assessee. The findings are arrived at on the basis of material available and appreciation thereof. They were the findings on facts, not liable to be interfered with by this court.

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• 2023 (7) TMI 749
  LTCG - Determination of base year from which the benefit of indexation would be available - AO held that the assessee acquired the rights in the property only from the date of settlement and therefore, indexation benefit would be available only from financial year 2014-15 - assessee claimed indexation of cost from financial year 2001- 02 - CIT(A) allowed the claim in terms of cited decision of Saroja Naidu [ 2021 (7) TMI 989 - MADRAS HIGH COURT] - HELD THAT:- We find that the adjudication in the impugned order follows binding judicial precedent of jurisdictional High Court. The revenue could not controvert this position. Therefore, we do not find any fault in the impugned order. Decided against revenue.

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• 2023 (7) TMI 748
  Estimation of income - bogus purchases - HELD THAT:- As the alleged bogus purchases are part of the total sales made by the assessee and accepted by the AO. Assuming yet not accepting that the impugned purchases are bogus all that can be added is the profit element embedded there in as held in the case of Mohammed Hazi [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT ] which has been followed by [ 2023 (6) TMI 1123 - ITAT DELHI ]. We find that the net profit shown by the assessee is 7.50%, therefore, the AO is directed to restrict the addition to 7.50% being the alleged bogus purchases and delete the balance amount. We further direct the AO to delete the addition being alleged commission on accommodation entries as the said amount has been subsumed in the aforementioned addition. Decided partly in favour of assessee.

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• 2023 (7) TMI 747
  Nature of land sold - Assessability of long term capital gains on sale of Agricultural Land - determination of municipal limit - Commissioner justification in relying on the data obtained from Google - whether the land sold by the assessee is within municipal limits of Vizianagaram or not - HELD THAT:- Since there is ambiguity in the certificates issued by both the revenue as well as the municipal authorities, we remit the matter back to the file of the AO to re-ascertain whether the land is within 8 kilometers of the municipal limits or not and pass appropriate orders accordingly. Appeal of the assessee is allowed for statistical purpose.

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• 2023 (7) TMI 746
  TP adjustment - comparable selection - parameters of FAR analysis ie., Assets employed - HELD THAT:- In the instant case, the Assets employed by the assessee company in the form of Plant Machinery whereas the comparable viz., BVPL selected the Ld. TPO has employed Assets in the form of Plant Machinery. We are therefore of the considered view that based on one of the parameters of FAR analysis ie., Assets employed, we hold that the comparable BVPL could not be a good comparable with that of the assessee company. Hence, the TPO / Ld. AO is directed to exclude the entity BVPL from the final set of comparables while reworking the international transactions. DTE Exports Pvt Ltd. and Premier Tobacco Packers Private Limited - We find that the exports constitute only 3.74% of the total turnover and therefore the Ld. TPO / Ld. DRP considered the insignificant exports of DTE Exports Pvt Ltd., and rejected it as a comparable. DRP has considered the inclusion of Premier Tobacco Packers Private Limited which does not have any export turnover. TPO has not applied filter of minimum of 50% should be from exports turnover in the case of Premier Tobacco Packers Private Limited. While observing the inconsistency in the comparables selected by the Ld. TPO wherein Ld. DRP also affirmed the selection of Premier Tobacco Packers Private Limited, we find that the same is not in accordance with Rule 10B(2)(d) of the Income Tax Rules, 1962. Therefore, we direct the TPO / Ld. AO to exclude Premier Tobacco Packers Private Limited as a comparable in determining the ALP of the assessee company. We noticed that the Ld. DRP has already excluded DTE Exports Pvt Ltd., based on the insignificant turnover and following the principle of consistency, we confirm the same. Export incentives - treated as operating or non-operating income for the purpose of PLI computation - HELD THAT:- Since the assessee has adopted TNM Method which was not disputed by the Revenue, Net Profit is used as a bench mark for ALP computation. Rule 10B(1)(e)(ii) provides for computation of net profit margin in the uncontrolled comparable transactions whereas a net margin realized by the enterprise namely the tested party as well as the comparables, the total income and expenditure of the business should be considered. It is also a general principle that all the subsidies / export incentives are factored by all the exporters while determining their sales price in the international market. We direct the Ld. TPO / Ld. AO to consider the export incentives as operating income while computing the PLI of the assessee. It is ordered accordingly.

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• 2023 (7) TMI 745
  Revision u/s 263 - Reopening of assessment u/s 147 - unexplained share capital - CIT observed that the A.O while framing the assessment had failed to make enquiries and verifications which he should have made to ascertain the identity, creditworthiness and genuineness of the transaction of receipt of share capital by the assessee company - HELD THAT:- As observed by the Pr. CIT and, rightly so, as the AO while framing the assessment had failed to carry out necessary verification as regards the very issue which had formed the basis of reopening of its case u/s 147 and had summarily accepted the authenticity of the assessee s claim of having received share capital from M/s. Cherry Vintrade Pvt. Ltd., therefore, the same had rendered his order as erroneous in so far it was prejudicial to the interest of the revenue as per Explanation 2 to Sec. 263 of the Act. Our aforesaid conviction that failure of the AO to carry out necessary verification while framing assessment and summarily accepting the explanation of the assessee would render the order passed by him amenable for revision u/s 263 of the Act is supported by the judgment of Deniel Merchants (P) Ltd [ 2017 (12) TMI 476 - SUPREME COURT] . On a perusal of the reasons to believe as per the information, the investment made with the assessee company of Rs. 21.20 lac (supra) by M/s Cherry Vintrade Pvt. Ltd. was sourced out of a receipt of Rs. 51 lac in the latters bank account, which amount had no business rationale or basis but was only received for layering purpose. We are unable to fathom that as to on what basis it is claimed by the ld. AR that reopening of the assessee s case was based on non-descript information. In our considered view, as the A.O had sufficient material with him to arrive at a bonafide belief that the income of the assessee company that was chargeable to tax had escaped assessment, therefore, the claim of the Ld. AR that the reopening of its case was based on non-descript information being absolutely misconceived is accordingly rejected. We, thus, in terms of our aforesaid observations concur with the view taken by the Pr. CIT who had rightly set-aside the assessment order passed by the A.O u/s. 143(3) r.w.s. 147 and, uphold the same. Decided against assessee.

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• 2023 (7) TMI 744
  Reopening of assessment u/s 147 - validity of approval granted by the CIT u/s. 151(1) - Addition on account of cash deposit in bank - unexplained cash credit u/s. 68 - HELD THAT:- A.O at the stage of initiating proceedings u/s. 147 of the Act had acted upon the ITS (Individual Transaction Statement) of the assessee as was available before him, as per which, cash deposits were made in her bank account during the year under consideration, therefore, he had sufficient material before him to arrive at a bonafide believe that income of the assessee chargeable to tax had escaped assessment. Thus, the additional grounds of appeal raised by the assessee are dismissed in terms of our aforesaid observations. Cash deposits in the bank account of the assessee were sourced out of the withdrawals made by her from the amount of Meher which was received by her at the time of her marriage and was credited in her bank account; as well as out of the personal savings that were accumulated by her over the years - As the assessee had neither before the lower authorities nor before us been able to successfully establish that the cash withdrawals made from her bank account were utilized for redepositing the same, therefore, her said claim cannot be fully accepted. Apart from that, a perusal of the bank account of the assessee in no way establishes an inextricable nexus between the cash withdrawals and cash deposits made in her bank account which would have otherwise fortified her aforesaid claim. Although, we find no logic or reasoning in the aforesaid claim of the Ld. AR, for the reason that it is incomprehensible that an assessee would have withdrawn amounts and thereafter redeposited the same in her bank account, but at the same time cannot remain oblivion of the substantial amount of cash that was available with the assessee out of the cash withdrawals made by her over the year. We find substance in the claim of assessee would have been in possession of certain cash in hand sourced out of the substantial amount of cash withdrawals made during the year under consideration; as well as her accumulated savings of the past years. Thus availability of cash of Rs. 1,00,000/- with the assessee can safely be held to have been sourced out of her past savings and cash withdrawals during the year, and the same would fairly take care of the aforesaid claim of the Ld. AR. We, thus, in terms of our aforesaid observations vacate the addition made by the A.O to the extent of Rs. 1,00,000/-. Assessee appeal partly allowed.

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• 2023 (7) TMI 743
  Bogus LTCL - Addition u/s 68 - cross-examination not provided - whether principles of natural justice have been complied with or not? - HELD THAT:- As alleged loss has been incurred by the assessee in the regular course of its business. We also note that the statement of various persons recorded by the AO/investigation wing/search team in the course of other proceedings as well as the report of the Kolkata investigation wing, there is no reference to a direct evidence indicating that the transactions in question is in the nature of accommodation entry or for arranging bogus loss. Thus, the addition/disallowance made by the assessee is merely on the basis of preponderance of probabilities. Therefore, in the present case, when the statements and investigation report relied upon by the AO has not been given to the assessee for the purpose of cross-examination as well as rebuttal, we in view of the above decision are inclined to hold that the alleged loss being genuine loss from share trading incurred by the assessee in regular course of business, deserves to be allowed. Thus, impugned disallowance is uncalled for. Long term capital gain exempt u/s 10(38) from sale of the scrip - As principles of natural justice have been violated while carrying out the assessment proceedings in the case of the assessee(s) since no opportunity for cross-examination was provided for those persons whose statements have been relied upon by the assessing officer for making the alleged additions. Secondly, there is no direct evidence referred to by the assessing officer or in the report of the investigation Wing that the assessee(s) have made arrangements with the entry operators/company owners for carrying out the alleged transactions. Thirdly, additions made by the assessing officer are merely based on a theory called preponderance of probability that in same type of cases prices are rigged up and down by the entry operators in order to provide accommodation entry to various persons in the form of Long term capital gain and though, the assessing authority can apply preponderance of probabilities in some cases on account of surrounding circumstances but so far as the cases on hand are concerned, we notice that firstly some observations were made by the SEBI regarding some fishy transactions carried out in case of few companies. Based on such primary information, the income tax department has carried out extensive enquiries and search and surveys in the case of various entry operators and alleged companies and based on such statements, a theory was established regarding such accommodation/bogus entries in the form of capital gains. Since in the case of the assessee, SEBI at a later stage has intensively carried out the investigation on the facts of the assessee(s) along with other persons as referred in the order of the SEBI (extracted supra), and after a detailed investigation and examination of records exonerated, the assessee(s) from the charges levelled in the show cause notice issued to them. Therefore, when the assessee(s) have been exonerated and the charges against them have been waived and the transactions of purchase and sale of equity shares carried out by them have been found to be genuine, the theory of preponderance of probabilities is ruled out in the case of the present assessee(s). Thus, when the transactions giving rise to the long term capital gain have been found to be genuine, and as per rules and regulation of SEBI, the finding of the ld. CIT(A) deserves to be set aside and the impugned additions in case of assessee(s) in appeal before us are uncalled for. Assessee appeal allowed.

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• 2023 (7) TMI 742
  Unexplained cash credit - Addition u/s 68 - failure of the assessee to satisfactorily explain the cash sales - HELD THAT:- We find that assessee has reasonably explained the nature and source of cash sales credited in his books of account. Allegation of the AO that those parties to whom assessee has sold gold and Jewellery in cash was neither the customer of the assessee prior nor post demonetization. Arguably this answer could have been obtained by the AO had he examined any of the customers whose permanent account no. and address are provided to him. The issue would have been different had AO made inquiry by issue of summons u/s 131 or inquiry u/s 133(6) which would not have been responded or satisfactory explanation was not available. Such is not the case before us. Identical issue has been dealt with by the coordinate bench in Heera panna Jewellers [ 2021 (5) TMI 447 - ITAT VISAKHAPATNAM] and M/S Mangal Jewels Pvt. Ltd [ 2022 (10) TMI 1187 - ITAT MUMBAI] - Therefore, this issue is clearly covered in favour of the assessee by these judgments also. It is not the case that bills of sales of Jewellery doesn t contend the complete address of the parties. Giving the complete address in cash memo/cash sales above Rs. 50 mandatory requirement of GST ACT. In this case such facts do not exist. Further cash transfer from Surat to Mumbai has been recorded in both branches cash book. Addition cannot be made in the hands of assessee merely for the reason that those customers have not transacted with the assessee post or pre demonetization. This could be the trigger point for investigation, but LD AO , despite having complete address and PAN of customers did not make any such inquiry. We confirm the order of CIT(A) to the extent addition deleted by him and reverse the order of the CIT(A) to the extent, he confirmed the addition. Therefore we direct the ld AO to delete the addition. Decided in favour of assessee.

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• 2023 (7) TMI 741
  Deduction u/s 80P(2)(d) - interest income received on fixed deposits and saving bank accounts maintained with Co-operative Banks - assessee is a registered Co-operative Housing Society - AO denied the deduction on the basis that the Co-operative Bank is covered under the provisions of section 80P(4) - HELD THAT:- We find that in Mavilayi Service Co-operative Bank Ltd. [ 2021 (1) TMI 488 - SUPREME COURT] while analysing the provisions of section 80P(4) of the Act held that section 80P(4) is a proviso to the main provision contained in section 80P(1) and (2) and excludes only Co-operative Banks, which are Co-operative Societies and also possesses a licence from RBI to do banking business. The limited object of section 80P(4) is to exclude Co-operative Banks that function at par with other commercial banks i.e. which lend money to members of the public. Thus, section 80P(4) of the Act is of relevance only in a case where the assessee, who is a Co-operative Bank, claims a deduction under section 80P of the Act which are not the facts of the present case. No merits in the aforesaid reasoning adopted by the AO in denying deduction under section 80P(2)(d) of the Act to the assessee. Claim of deduction u/s 80P(2)(d) - All Co-operative Banks are Co-operative Societies but vice versa is not true. We find that the coordinate benches of the Tribunal have consistently taken a view in favour of the assessee and held that even the interest earned from the Co-operative Banks is allowable as a deduction under section 80P(2)(d). Even in assessee s own case for the assessment year 2016-17 [ 2021 (3) TMI 1425 - ITAT MUMBAI] allowed the deduction claimed by the assessee under section 80P(2)(d) of the Act, by following the decision rendered in assessee s own case for the assessment year 2015-16 - Decided against revenue.

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• 2023 (7) TMI 740
  TP Adjustment - corporate guarantee ( CG ) extended by the assessee to its foreign subsidiary - HELD THAT:- We note that the CIT(A) had rightly taken note of facts and circumstances and held that the holding company, i.e. SCKPL, that had actually provided the guarantee along with the assessee, had in aggregate charged 1.2% (1% by SCKPL 0.2% by the assessee), which exceeded the reasonable rate of commission of 0.5%, as held in a series of rulings, and thus no upward adjustment was warranted. Decided against revenue. TP adjustment made u/s 40A(2)(b) - specified domestic transaction involving loan availed from AE, SKCPL and its director - benchmarking the interest rate paid to AEs against the interest rate paid to M/s Silver Cross Marketing Private Limited. - HELD THAT:- CIT(A) had rightly found that Ld. TPO was incorrect on facts and in law in benchmarking the interest paid by the assessee to AEs with the interest paid to M/s Silver Cross Marketing Private Limited. Coming back to the determination of ALP, the assessee has placed on record the Prime Lending Rate ( PLR ) of 14.55% as notified by the State Bank of India for the year 2013. Accordingly, when the prime lending rate itself had increased over the years and stood at 14.55% for the relevant period, the comparable rate of interest could not be considered at erstwhile rates in a dynamic interest rate environment. Hence, the interest rate of 13.5% paid by the assessee to its AEs being comparable to the prevailing PLR cannot be said to be excessive. We find support from the decision of Cotton Naturals (I) Pvt. Ltd. [ 2015 (3) TMI 1031 - DELHI HIGH COURT] - Also, the facts on record show that the AE, SKCPL had itself paid interest at the rate of 12.75% to SBI during the relevant year and therefore the interest rate of 13.5% i.e. 12.75% plus mark-up (as amended with effect 01.04.2013) charged from the AEs was fair reasonable. The ld. D/R, could not controvert this factual matrix. Decided against revenue.

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• 2023 (7) TMI 739
  Exemption u/s. 11 - Assessee Trust failed to invest the accumulation u/s. 11(2) in specified modes as per section 11(5) within the stipulated time - Form No. 10 was not filed along with the original Return filed u/s. 139(1) - HELD THAT:- The assessee has clarified that the accumulated amount is deposited in bank as per the provisions of section 11(5) within six months from the year ended in which the accumulation made. The assessee claimed the accumulated amount deposited. Thus the same are deposited within the period specified u/s. 11(2) of the Act. The Ld. CIT(Exemption) verified only balance sheet for the year ended 31.03.2019, while the above amount was reflected in the balance sheet of the year ended 31.03.2020. Therefore the findings arrived by the Ld. CIT(Exemption) is not correct in law. Further though the assessee filed Form No. 10 belatedly along with the Revised Return, however Form No. 10B which was filed along with the original return also certifies the amount of accumulation made by the assessee Trust. Without looking into the same, the assessee was denied the benefit of exemption u/s. 11 of the Act, which in our considered opinion is not correct in law. We hereby set aside the order passed by the Lower Authorities and direct the JAO to allow the claim of exemption u/s. 11 - Decided in favour of assessee.

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• 2023 (7) TMI 738
  Late payment of PF ESI (Employee s Contribution) - one day delay - due date for payment of ESIC and EPF contributions prescribed in the respective acts of ESI PF falls on Sunday or gazetted holiday - HELD THAT:- Considering the fact that the due date for depositing the contribution of ESIC EPF falls on Sunday and gazetted holiday, the said delay of one day deserves to be condoned as per Section 10 of General Clauses Act. Also observed that the assessee has no intention not to deposit the contribution of ESI EPF well within the time, depositing the contribution very next day of Holiday proves the bona-fide of the Assessee. Therefore, in our opinion, the authorities have committed error in disallowing the deposit made with one day delay where the due date under respective acts falls either on Sunday or on gazetted holiday. Decided in favour of assessee.

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• 2023 (7) TMI 737
  Reopening of assessment u/s 147 - assessee has not filed his return of income and gross receipts of the assessee were very high - HELD THAT:- Because the assessee has not filed his return of income and because the gross receipts of the assessee were very high, the AO assumed jurisdiction u/s 148 of the Act and initiated reassessment proceedings. There is no error or infirmity in this action of the AO. This ground taken is dismissed. GP estimation - When the bench pointed out that let the AO verify and examine the reconciliation, the assessee reluctantly once again showed his inability and insisted the bench to decide the quarrel here itself. Considering the history of the assessee, we are left with no choice but to accept the gross receipts shown in Form No. 26AS as true and correct as on such receipts, payers have deducted tax at source and the assessee has claimed the same as prepaid taxes. Applying the profit rate of 8%, profit to be calculated. AO is directed to frame assessment at these incomes and allow the claim of deduction under Chapter VIA, details of which shall be provided by the assessee. AO is also directed to give credit of TDS as per Form 26AS.

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• 2023 (7) TMI 736
  Revision u/s 263 - insufficient inquiry conducted by the AO on the issue of cash found deposited during the demonetization period - as per CIT AO in making disallowance @ 20% of cash deposits made in the bank accounts is erroneous in so far as it is prejudicial to the interests of revenue - HELD THAT:- The assessee had clearly demonstrated that the entire cash deposited during demonetization could not be treated as unexplained; that its scale of business operations was huge and nature of business was such that 90% of its sales was done in cash, and even prior to demonetization, the assessee had made huge cash sales commensurate to the sale made during the demonetization period. All these explanation given by the assessee was rightly taken note of by the AO and finding anomaly to the extent of substantial increase in sales during the demonetization period, he considered it fit to treat 20% of the sales as unexplained credits. Pr.CIT s view that entire cash deposits during this period is to be treated as unexplained, is contrary to the facts on record, wherein the assessee has demonstrated the factum of huge turnover prior to and post demonetization in the preceding year, and even in the succeeding year, and also factum of majority of the sales being in cash. There was no occasion at all for the AO to treat the entire cash deposited during the demonetization period, as unexplained credits. The facts on record could not have led to the inference that entire sales made by the assessee during the demonetization period were bogus. In fact, the inference drawn by the AO, that only a portion of it could be treated as bogus/unexplained, was not incorrect. Therefore, we hold that the ld.Pr.CIT s finding of error is based on incorrect appreciation of the facts before it, and his finding that the assessee had not been able to substantiate its explanation for cash sales completely is also not correct. Thus we hold, could not have been inferred from the facts on record, and there is no error as such in the order of the AO in this regard. The order passed by the ld.Pr.CIT u/s 263 of the Act holding the assessment order erroneous so as to cause prejudice to the Revenue is therefore not sustainable in law - Decided in favour of assessee.

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• 2023 (7) TMI 735
  Nature of expenses - disallowance of consultancy charges as capital expenditure relatable to capital work in progress and not allowable u/s.37(1) - HELD THAT:- As part of expenditure is for the loan from where substantial payments were made in respect of capital work in progress and not for existing business or continuing the business. The same has been found to be excludable as capital expenditure and not allowable under Section 37(1) - The same is, therefore, though not capital expenditure but related to incidental to acquisition of plant/machinery for capital work in progress. The appellant himself worked out such disallowance relatable to capital work in progress and therefore finally found not allowable u/s 37 by the Ld. CIT(A), which according to us is just and proper and without any ambiguity, particularly, in the absence of any assistance rendered by the assessee before us. The same is, therefore, upheld. This ground of appeal, thus, fails. Disallowance of interest - Addition on the ground that the same is relatable to capital work in progress - HELD THAT:- CIT(A) worked out Rs.44,00,045/- as extended by the appellant towards capital work in progress and working of interest thereon and the same amount, therefore, has been confirmed by the Ld. CIT(A). The reason given by the Ld. CIT(A) as narrated hereinabove seems to be justified in the absence of any assistance rendered by the assessee before us. The same is, therefore, upheld. Disallowance on account of travelling expenses - purpose of travelling was not submitted by the appellant, the details of such travels or the tour since not submitted - HELD THAT:- As the impugned amount was not found related to business, the restriction of addition made by the Ld. CIT(A) to the amount of Rs.2,14,419/- is found to be justifiable. The same is, therefore, confirmed. The ground of appeal is, thus, found to be devoid of any merit and, thus, dismissed.

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• 2023 (7) TMI 734
  Exemption u/s. 11 and 12 - applicability of proviso of section 2(15) - activities of the assessee advancement of any other object of general public utility - HELD THAT:- We hold that the activities of the assessee for advancement of any other object of General Public Utility for charitable purpose and therefore the assessee corporation shall be entitled to exemption u/s. 11 - As further clarified in case of ACIT vs. Ahmedabad Urban Development Authority [ 2022 (11) TMI 255 - SUPREME COURT] wherein it has been clearly held that the Revenues Appeals are dismissed as far as statutory Corporations/Boards. Decided against revenue. Violations of provisions of Section 11(5) with regard to the investments made in Gujarat Alkalies and Chemicals Ltd. (GACL) and Gujarat Lease Finance Ltd. (GLFL) thereby attracting provisions of section 11(1)(d) - As in the case of Gujarat Maritime Board [ 2023 (4) TMI 32 - ITAT AHMEDABAD] after considering the case of Fr. Mullers Charitable Institutions [ 2014 (2) TMI 1033 - KARNATAKA HIGH COURT] , S.P. Memorial Trust [ 2014 (11) TMI 1111 - GUJARAT HIGH COURT] and Sheth Mafatlal Gagalbhai Foundation Trust [ 2000 (10) TMI 26 - BOMBAY HIGH COURT] allowed the issue in favour of the assessee as held only the relevant income falling within the mischief of section 13(1)(d) of the Act will lose the benefit of exemption under section 11 and 12 of the Act and the balance of the total income of the trust will remain eligible for the benefit of exemption under section 11 of the Act. Violation of section 13(1)(d) cannot lead to denial of exemption under section 11 and 12 of the Act, to the total income of the trust. The grounds raised by the assessee is hereby allowed. As there is no new investments made by the assessee both in GACL and GLFL during the present assessment year, the disallowance shall be restricted only to the dividend income of Rs. 2.26 crores only and exemption u/s. 11 and 12 of the Act cannot be denied to the assessee. Thus the ground no. 3 raised by the assessee is allowed.

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• 2023 (7) TMI 733
  Addition u/s 69B - higher rate of tax u/s 115BBE - excess stock surrendered during the course of survey - assessee has declared the income as business income in the return income which was treated by the AO as deemed income u/s 69B - AO has applied the provision of section 69B of the Act for want of any supporting evidence regarding source of excess stock and nature of income which was not found recorded in the books of account at the time of survey - HELD THAT:- CIT(A) find that the alleged excess stock was not kept separately at any other place and was part of the total business stock found at the assessee s business premises are sufficient enough to indicate that the alleged investment in excess stock is part of the business income we also find that alleged excess stock was duly accepted by assessee as part of unaccounted business and source thereof stated during the course of search itself and no other incriminating material was found during search proceedings and therefore is not an undisclosed income as held by the AO. We, therefore, find no infirmity in the finding of Ld. CIT(A) rightly holding that the provision of section 115BBE are not applicable on the surrendered income on account of excess stock valuing found during the course of search. Thus, grounds no. 1 to 3 raised by the revenue are dismissed. Whether the excess stock found during the search which is not separate from the entire lot of stock of the assessee can be treated as other valuable articles though certainly not in the nature of bullion and jewellery ? - The Hon ble Apex Court in M/s D.N. Singh [ 2023 (5) TMI 746 - SUPREME COURT] has analyzed the provision of section 69, 69A 69B and particularly the term other valuable articles as employed in the provision of section 69B - In the light of the Doctrine of ejusdem generis noscitur a sociis it is held that other valuable articles as provided in section 69A 69B of the Act must be read ejusdem generis and statutory interpretation would be that a generic word receives a limited interpretation by reason of its context and take its meaning from the specific term used in the provision. Therefore, the term other valuable articles would draw the meaning from the specific terms used in the provision of section 69B which is bullion and jewellery. Hence the other valuable articles shall be in the nature of the valuable article like bullion and jewellery and therefore, it must be a substitute of money like bullion and jewellery which has the liquidity and negotiability like money/currency. Therefore the excess stock found during the course of search which is not separable from the whole lot of stock of the assessee generated as a result of business activity of the assessee company and the same cannot be brought into mischief of provision of section 69B of the Act - Appeal of assessee is allowed.

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• 2023 (7) TMI 732
  Penalty u/s 271(1)(c) - difference between contract receipt as per books of accounts and as per Form No.26AS statement - HELD THAT:- Such mistake was a bonafide mistake due to volume of contract receipts from various sites and from various parties certain receipts were not taken into account by the assessee. As relying upon the decision of CIT vs. Reliance Petroproducts (P) Ltd. [ 2010 (3) TMI 80 - SUPREME COURT] wherein it is held that making of incorrect claim in law cannot tantamount to furnishing of inaccurate particulars or concealment of income. Therefore, the penalty levied under the same does not sustain. Penalty in respect of disallowance u/s 40A(3) for Vehicle Expenses , the same cannot be said as concealment of income as the assessee has genuinely claimed the vehicle expenses and, therefore, the penalty in respect of this item does not sustain. Penalty in respect of disallowance u/s 40A(3) for cash payment for purchase of Gold Ornaments , the assessee has genuinely claimed the said expenditure and, therefore, it cannot be treated as concealment of income or furnishing of inaccurate particulars of income. This penalty also does not sustain. Disallowance u/s 36(1)(va) for delay in depositing employees Provident Fund , the same does not sustain as the issue at the time of assessment proceedings was a debatable issue and certain decisions of Hon ble High Courts were in favour of the assessee. Therefore, this cannot be treated as concealment of income or furnishing of inaccurate particulars of income. The penalty on this disallowance also does not sustain. Appeal of the assessee is allowed.

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• 2023 (7) TMI 731
  Validity of reopening of the present assessment - ADIT (Inv.) Unit-III, Kolhapur was investigating suspicious transactions regarding large value of cash transactions in various specific bank accounts - bogus purchases - HELD THAT:- In the instant case, we observe that the AO was in receipt of information that assessee had made bogus purchases on the basis of information received from ADIT (Inv.), Kolhapur. Accordingly, we are of the considered view, that in the instant facts the Assessing Officer had sufficient material / information in his position to form a prima facie belief that income had escaped assessment and hence issuance of notice for reopening the re-assessment proceedings was justified, looking into the facts of the instant case. Accordingly, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in holding that re-assessment proceedings have been validly initiated under Section 147 of the Act. In the result, Ground No.1 of the assessee s appeal is dismissed. Bogus purchases - GP addition - Investigation Wing of the Department after detailed enquiry and after taking the statement of various Hawala operators on record and on the basis of evidence furnished by such Hawala operates, had come to the conclusion that the assessee had made bogus purchases from the two parties. In the instant facts the assessee had made a specific requisition for allowing the opportunity of cross-examination of the concerned persons on the basis of whose statement the additions have been made in the hands of the assessee (by holding that the purchases from M/s. Param Trading Company and M/s. Rheem Tradelink Pvt. Ltd. is bogus). Accordingly, in the interest of justice, the matter is being set-aside to the file of Ld. CIT(Appeals) so as to offer the assessee an opportunity of cross-examining the concerned persons on the basis of whose statements the aforesaid addition have been made in the hands of the assessee. Appeal of the assessee is allowed for statistical purposes.

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• 2023 (7) TMI 730
  Exemption u/s 11 - disallowance of expenditure incurred on foreign travel - Assessee s contention is expenditure incurred on foreign travel was to obtain donations from the donors who were abroad - HELD THAT:- The donations received include from agencies such as Silicon Valley Foundation, Global Giving, etc. The chart showing the details of the foreign travel expenditure incurred along with the purpose is enclosed. The details of the donations received and utilization of the same is also enclosed in the records. The expenditure incurred was for obtaining the donations from the various donors who were stationed abroad and the utilization of the donation was also for the objects of the Trust. Thus donations received are utilized for charitable purpose which is never doubted by the AO, the foreign travel expenses incurred for obtaining the above said donations is to be allowed as an expenditure. Appeal of assessee allowed.

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• 2023 (7) TMI 729
  Valuation of the property - cost of investment in land - Relevance of valuation report of the DVO - AO computed the total income from construction activities by adopting the method of total income received from Payne Realtors Private Limited as reduced by the amount paid to the unit holders and part of opening stock and part of current year expenses - HELD THAT:- Since the Departmental Valuation Officer appointed by the Department to value the cost of investment in the aforesaid land and also the cost of construction incurred by the assessee for completion of project, has estimated the combined value of the cost of land and cost of construction at a value which is higher than that value submitted by the assessee, albeit marginally than the cost estimate given by the assessee, then no addition is called for in the instant set of facts. We observe that that Ld. CIT(Appeals) has noted that the cost of investment in land has been shown by the assessee at Rs. 3.25 crores and same has been valued by the DVO also at Rs. 3.25 crores. In case of cost of investment in building, the cost of construction has been declared by the assessee Rs. 10.79 crores, whereas the Departmental Valuation Officer has estimated the same at Rs. 11.03 crores. Therefore, on comparison of the two, the overall cost shown/claimed by the assessee is lesser than the valuation done by the DVO appointed by the Department. We are of the considered view that Ld. CIT(Appeals) has correctly held that since as per the report prepared by the DVO, the value of cost property is more as compared to the cost estimate given by the assessee, the addition made by the AO is not sustainable.Decided in favour of assessee.

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• 2023 (7) TMI 728
  Addition u/s 56(2)(viib) - Value of share premium received on allotment of 31248 shares - valuation done by the valuer cannot be accepted both on the reasonable and technical ground - entire value of share premium received on allotment of 31248 shares is considered in excess of fair market value of shares of Rs.. 10 per share - HELD THAT:- By considering the disclaimer made in the report the AO came to the conclusion that the valuer has merely obtained the values from the assessee and carried out the valuation as per the requirement of the assessee and accordingly he rejected the valuation report with the above observation as well as the valuation report should have been obtained from the merchant banker rather than the Chartered Accountant firm. Even Ld.CIT(A) has sustained the additions as well as findings of the AO. We observe that in the first year of operation assessee has issued 31248 shares with a premium and valued by adopting one of the method approved in the Rule 11UA of the I.T. Rules. As per the facts on record we observe that assessee has selected one of the method approved in the Rule 11UA of I.T. Rules and it is supposed to get report from merchant bankers but assessee has taken the report from Chartered Accountant Firm. Except the report obtained from the Chartered Accountant Firm assessee has followed the due process of law. Since the assessee has submitted report from merchant banker which is more or less similar to the valuation report submitted by the Chartered Accountant Firm and Ld. DR made a submission that it may remit back to the file of the AO so that it can be properly verified. Even valuation report obtained from the merchant bankers even they have issued a limitations and warrantees to the valuation report. Therefore, the disclaimer of a valuer cannot be a basis for disallowing the proper allotment of shares. It is not a bar on the assessee to issue shares with a premium as per companies Act. Thus we are inclined to delete the additions proposed by the Assessing Officer. Decided in favour of assessee.

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• Customs

• 2023 (7) TMI 727
  Eligibility for concession under Project Import Scheme - Koch Membrane Systems - benefit of N/N. 14/2004-Cus. denied - Department has contended that the imported goods are merely Membranes and not Membrane System - HELD THAT:- From the technical literature of the product, it can be seen that the goods are membrane systems. The very same issue was considered by the Tribunal in the case of CC. (IMPORT), MUMBAI VERSUS ROCHEM SEPARATION SYSTEMS INDIA LTD. [ 2009 (11) TMI 272 - CESTAT, MUMBAI ]. The Tribunal after considering the issue held that the Reverse Osmosis Membrane Filtration System will fall within the meaning of plant used in the definition of water supply project, in the notification 14/2004. Apart from this, in the present case, the respondent has furnished the installation certificate which mentions the goods as effluent treatment unit with reverse osmosis to deliver water for re-use . From the documents, it is convincing that the goods imported are membrane systems and are eligible for the exemption under Notification No.14/2004-Cus. The decision relied by the Ld. AR in the case of Pure Cure Technology Vs. Commissioner of Customs, Mumbai [ 2018 (12) TMI 617 - CESTAT MUMBAI] appearing for the Department is not applicable to the facts of this case, as the said decision relates to Notification No. 6/2006-CE dated 01.03.2006 which is for water purification equipment specified in the said notification. There are no merits in the appeal filed by the Department, the same is dismissed.

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• 2023 (7) TMI 726
  Omission to claim duty drawback - Focus Product Scheme - conversion /amendment of the shipping bills into drawback shipping bills - no examination of the goods exported - rejection of request for conversion of shipping on the ground that the appellant has not established that the omission to file the drawback shipping bills was due to reasons beyond his control. Whether the rejection of request for conversion of shipping bills into drawback shipping bill is legal and proper? - HELD THAT:- The first ground for rejection is that some of the requests are made beyond the period of 3 months as stipulated in the Board circular No.36/2010. The very same issue came up for consideration before the Tribunal in the case of Autotech Industries (India) Ltd. [ 2021 (11) TMI 518 - CESTAT CHENNAI ] and the Tribunal held that the request for conversion of shipping bill cannot be rejected as time barred on the basis of the Board circular. The second ground for rejection is that the packages have not been opened for examination - HELD THAT:- In the present case, the shipping bills are filed under the Focus Product Scheme and are not completely free shipping bill. The exporter cannot be disadvantaged by rejecting the request for conversion of the shipping bill when the export of goods have not been disputed. Further, there is no evidence brought forth by the department as to any specific violation of any provisions of law with regard to the goods exported. The third ground for rejection is that the appellant has not put forward any ground justifying that the omission to file drawback shipping bill was for reasons beyond his control - HELD THAT:- It can be seen that Rule 12(1) of Drawback Rules,1995 allows conversion of shipping bill, if the exporter or his authorized agent has, for reasons beyond his control, failed to file the declaration. In the present case, the appellants have submitted that they had inadvertently omitted to file the declaration that the shipping bills are drawback shipping bills - appellant has given plausible explanation for the omission. The rejection of request for conversion on this ground cannot sustain and requires to be set aside. The rejection of request for conversion of shipping bill is not justified. Impugned orders are set aside - appeal allowed.

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• 2023 (7) TMI 725
  Revocation of Customs Broker License - forfeiture of security deposit - penalty under regulation 18 of Customs Brokers Licensing Regulations, 2018 - claim for drawback that were found to mis-match in description - denial of cross-examination of some of the key persons connected with the export - violation of principles of natural justice - HELD THAT:- Considering the criticality of observance of principles of natural justice in proceedings that may have the effect of extinguishment of livelihood of appellant and its employees, denial of cross-examination of persons taints the entire proceedings. It would appear as the enquiry has relied substantially upon the statements of the said individuals, it was improper on the part of the inquiry officer to deny cross-examination. Furthermore, in his capacity as licensing authority it was incumbent upon the Commissioner of Customs to ensure that, in matters jeopardizing the livelihood of customs brokers, no deviation from the principles of natural justice is to be tolerated. A tainted enquiry is no enquiry. However, an incomplete enquiry is no ground, as sought by Learned Counsel, for exoneration of a customs broker charged with breach of obligations prescribed in regulation 10 of Customs Brokers Licensing Regulations, 2018. Matter remanded back to the original authority, directing that fresh enquiry be carried out not only in accordance with the regulations but in compliance with principle of natural justice and decide afresh on the charges framed against the appellant - appeal allowed by way of remand.

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• 2023 (7) TMI 724
  Revocation of customs broker licence - forfeiture of security deposit - imposition of penalty - enabled certain persons to avail ineligible drawback and refund of integrated goods and service tax (IGST) in export of goods supported by fake purchase invoices to inflate the claims - involving misuse of importer-exporter code (IEC) of 41 purported exporters - HELD THAT:- It cannot be accepted that customs brokers are obliged to deal directly, and only, with exporters. Implicitly, there is recognition of intermediary as client of the customs broker. It also appears that these proceedings have been initiated primarily on account of the entire scheme having been master-minded by one or more beneficial owners taking recourse to documentation made available by exporters on record. There was a time when Customs Act, 1962, in section 2(20), recognised exporters solely as inclusive of any owner or any person holding himself out to be exporter and only in relation to any goods between entry for export and actual export. Inevitably, this always did, and continues to, exclude any transactions which precedes the filing of shipping bills under section 50 of the Customs Act, 1962 and restricted to the owner or any person holding himself out to be an exporter. Subsequently, by amendment of 2017, the term encompassed beneficial owners too. Consequently, any person can be an exporter and any person may act on behalf of the exporter and, thereby, become a client of customs brokers. What we see here are several loose threads - loose threads that do not curtain off the threshold ingress but, at the same time, these loose threads have been twisted together to form a noose that does not hold - the finding of the licensing authority that obligation under regulation 1(4), 10(d) and 10(n) of Customs Brokers Licensing Regulations, 2018 have been violated by the appellant, cannot be concurred upon. The appellant had obtained, even if not directly, necessary documentation of the exporter on record and there is no evidence that the exporters did not exist at the given addresses. There is also no evidence that the client had not been exhorted to abide by the Customs Act, 1962. The suspect transaction occurred before the goods were entered for export and the documents thereto pertain to transactions before the goods were entered for export. There are no merit in the impugned order which is set aside - appeal allowed.

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• 2023 (7) TMI 723
  Eligibility to import all types of goods including Coffee husk - classifiable under the CTH 09019010 - Rule 5(1)(a) of Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 - HELD THAT:- In the present case as evident from the application for Procurement of Goods under the said Rule, the importer obtained sanction for import of Indonesia Robusta Coffee Beans having CIF Value of Rs. 65,38,813/-. As per the invoice, description of the goods is shown as Indonesia Robusta Coffee Beans and as per the description of the consignment mentioned in certificate of quality issued by credited agency it shows bags of Indonesian Robusta Coffee Beans. As per Chapter 9 of Customs Tariff, heading; 0901 reads; Coffee, whether or not roasted or decaffeinated; coffee husks and skins; coffee substitutes containing coffee in any proportion . Bulk import of Rob Cherry is classified under 09011145 and when imported goods consisting only of coffee husks and skins they are classified under 09019010. However, in the present import, there are discrepancies in the description of goods and when the said discrepancy was brought to the notice of the importers, the appellant vide, letter dated 10.12.2022 admitted that the cargo was not matching with the cargo declared in the documents and also admitted that the cargo was found to be coffee Husk/bits, which is classified under CTH 09019010. Rule 5(1)(a) of Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 cast duty on importer to ensure import of goods as approved and if any change in description/classification, importer should have sought necessary amendment by submitting details of such goods from the appropriate authority. In the present situation, goods even if they are considered as Coffee husk/Bits as alleged, they are legally permitted subject to fulfillment of condition 2A under General Exemption No. 69, Notification 52/2003-Cus. Dated 31.03.2003. The importer can approach the concerned authority and submit a fresh application under Rule 5(1)(a) of Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017, providing the information as was found by the customs authorities on examination of the goods and on submission of the amended/revised permission the Customs authorities to release the goods by extending the benefit of Notification No. 52/2003-Cus. Dated 31.03.2003 - Appeal allowed.

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• 2023 (7) TMI 722
  Benefit of duty free import as raw materials as per Notification No.52/2003-Cus dated 31.03.2003 denied - misdeclaration of goods - Coffee Husk/Bits or Robusta Coffee Beans? - Classified under CTH 09019010 or not - typographical error or intentional misdeclaration? - HELD THAT:- While issuing general exemption on import of goods for EOU, it is specified that such EOU must follow procedure prescribed under Rule 5(1) (a) of Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017. In the present case as evident from the application for Procurement of Goods under the said Rule, the importer has provided information/ documents to Customs Export Promotion Cell and executed B-17 bond for import of Vietnam Robusta Coffee having CIF Value of Rs. 96,09,828/-. As per the invoice, description of the goods is shown as Vietnam Robusta Coffee and as per the description of the consignment mentioned in Certificate of Quality and Weight by the exporter/seller in Vietnam it shows Vietnam Robusta Coffee and Quality: Moisture-13%, Husks-50%, Broken Kernels -50%. On arrival of the goods, Bill of entry was filed by giving description of goods as Vietnam Robusta Coffee . It is an admitted fact that the importer sought bulk import of Vietnam Robusta Coffee and entire documents including Bill of entry shows proper declaration. When permission was given for import of Vietnam Robusta Coffee, percentage of constituents like Beans, husk and skins were not mentioned. In the absence of any such condition, no allegation of mis-declaration can be alleged at the time of import. The power vested in the Customs authority is to verify that the goods are as per the import documents and the relevant approvals and it is for the concerned authority under Special Economic Zone to consider the request of EOU to import raw material suitable for import and to ensure fulfillment of export obligations as per the norms issued from time to time. In the present situation, goods even if considered as consisting of coffee husk/bits as alleged, it is legally permitted to import subject to fulfillment of condition 2A under General Exemption No. 69, Notification No. 52 / 2003-Cus dated 31.03.2003. The respondents are directed to release the goods by extending the benefit of Notification No. 52 /2003-Cus dated 31.03.2003 - appeal allowed.

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• 2023 (7) TMI 721
  Import of rough marble slabs without Special Import License - matter was remanded to the original authority to verify the factual position of margin of profit and to decide upon quantum of redemption fine and penalty, which were not considered - HELD THAT:- The details of calculation were provided to the original authority. However, the original authority has not taken into consideration the same - it is found that appellant had made written submissions before the original authority. As stated in the impugned order, the appellant had submitted before the original authority that fine cannot be more than Rs. 1,91,000/- and penalty may be restricted to 5% of the assessable value. Taking the facts and circumstances into consideration, the impugned order modified to the extent that the penalty reduced from Rs. 3,10,000/- to Rs. 48,000/- under Section 112(a) of the Customs Act, 1962 - redemption fine of Rs. 1,91,000/- upheld - it is also noted that appellant has already paid redemption fine and penalty at the time of clearance of the goods. Appeal allowed in part.

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• PMLA

• 2023 (7) TMI 757
  Money Laundering - attachment of properties - petitioner submits that the amount deposited in the Adarsh Credit Cooperative Society Limited and their claim for such amount ought to be settled by the respondents on count of the fact that the assets of the such society ought to be utilized for reimbursing the lawful depositors - HELD THAT:- This Court in the case of DIPESH MISHRA, DR. RAKHI KHANNA, MAN MOHAN RATHI, MUKESH NAHATA, ASHA GUPTA, SURENDRA KUMAR VERMA, SUBHASH GUPTA, RAJA RAM SINGH, SHEEFALI SARASWAT AND OTHER VERSUS UNION OF INDIA, THE DEPUTY DIRECTOR, DIRECTORATE OF ENFORCEMENT AND OTHER [ 2022 (7) TMI 1437 - RAJASTHAN HIGH COURT] has held that it is not the correct remedy at this stage to approach this Court in the writ jurisdiction, as there is an appropriate remedy under Section 26 of the PLMA. Upon such submissions having been made, this Court is conscious of the fact that earlier orders were being passed for making representation to the liquidator by the depositors for their respective claims, but the turn of events and particularly, the judgment of this Hon ble Court as well as the proposition under the PMLA, which includes attachment and the adjudication before the appellate Tribunal, does not call for any interference at this stage. The present petition is disposed of with liberty to the petitioners to take-up all their issues before the appellate Tribunal under the PMLA and also make their claim before the liquidator and such claim can be decided by the appellate Tribunal and in consequence of the same the liquidator may act strictly in accordance with law.

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• 2023 (7) TMI 720
  Money Laundering - conspiracy - misappropriation and diversion of the food grains meant for persons below poverty line, mid-day meal and Antyoday scheme in Varanasi district - HELD THAT:- It is significant to note that the offence under Section 37 of the Air (Prevention and Control of Pollution) Act, 1981 was not mentioned in the Schedule of Offences appended to PMLA originally. It was inserted in paragraph 24 of Part B of the schedule by Act 21 of 2009. Thus the offence under Section 37 of the Air (Prevention and Control of Pollution) Act, 1981 was not a Scheduled Offence under PMLA during the period 12.09.1984 to 17.07.2007, which it was committed, yet the accused was charged with commission of offence under Section 3 of the PMLA. The co-ordinate Bench rightly did not interfere with the proceedings on the Ground that on the date of commission of the predicate offence, it was not a Scheduled Offence. The offence of money laundering is an offence separate and distinct from the Scheduled offence. The complaint alleges that the petitioners have derived proceeds of crime and they have siphoned off the same. The petitioners have been involved in possession, acquisition and use of the proceeds of crime and they have enjoyed the proceeds of crime by it s possession, acquisition and use. The trial Court has ignored that the minimum threshold for all cash transaction or any transaction is given as per Rule 3 is Rs. 8,27,711/-.10 Lakh is concerned, although the ground does not specify as to which set of Rules is being referred by the petitioners, it appears that the petitioner is referring to Rule 3 of Prevention of Money-laundering (Maintenance of Records) Rules, 2005, which have been framed for regulating maintenance of records of the nature and value of transactions, the procedure and manner of maintaining and time for furnishing of information and verification of records of the identity of the clients of the banking companies, financial institutions and intermediaries . Rule 3 has no relevance for deciding as to whether a person needs to be tried for commission of an offence under section 3 of PMLA - the trial Court has rightly rejected the application for discharges of the petitioners and there appears to be no illegality in the orders. In any case, the orders do not suffer from any such illegality as calls for interference of this Court in exercise of its revisional jurisdiction. The revisions lack merit and the same are dismissed.

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• Service Tax

• 2023 (7) TMI 756
  Levy of Service Tax - Banking and other Financial Services - amount deducted by the foreign bank towards the bank charges - period 2011-12 - HELD THAT:- The very same issue has been settled in favour of the appellant in its own case in Service Tax Appeal No. 40204 of 2013 decided by this very Bench in M/S. SKM EGG PRODUCTS EXPORT (I) LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE (APPEALS) , ANNAI MEDU SALEM. [ 2023 (3) TMI 1384 - CESTAT CHENNAI] wherein this Bench, after following other orders of co-ordinate CESTAT, New Delhi in the cases of M/S. THEME EXPORTS PVT. LTD. VERSUS C.S.T., DELHI [ 2018 (5) TMI 825 - CESTAT NEW DELHI ] and M/S DILEEP INDUSTRIES PVT. LTD. VERSUS CCE, JAIPUR [ 2017 (10) TMI 1231 - CESTAT NEW DELHI ], has held that the appellant cannot be treated as service recipient and no service tax can be charged under Section 66A read with Rule 2 (1)(2)(iv) of the Service Tax Rules, 1994. The issue in the case on hand stands settled in favour of appellant and consequently, the impugned order is set aside - appeal allowed.

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• 2023 (7) TMI 719
  Refund of unutilised CENVAT Credit - intermediary services or not - POPOS Rules - export of services - rejection of refund on the ground that the place of provisions of service appeared to be in India as the services rendered by BlackBerry India were as an intermediary - HELD THAT:- It is apparent from the definition of intermediary that an intermediary merely arranges or facilitates provision of services. In the present case, the services rendered by BlackBerry India to BlackBerry Singapore under the Agreement, were not in the nature of facilitating services from another supplier. BlackBerry India, as an independent service provider, was required to render the promotional and marketing services; technical marketing assistance; and other related services. BlackBerry India did not arrange or facilitate these services from another supplier. It is clear from the Circular dated 20.09.2021 that BlackBerry India cannot be considered as an intermediary in the context of the services rendered by it under the Agreement. This Court had also considered a similar question albeit in the context of refund of input tax credit under the Integrated Goods and Services Tax Act, 2017 in M/S. ERNST AND YOUNG LIMITED VERSUS ADDITIONAL COMMISSIONER, CGST APPEALS -II, DELHI AND ANR. [ 2023 (3) TMI 1117 - DELHI HIGH COURT ] where it was held that There is no dispute that the recipient of Services that is EY Entities are located outside India. Thus, indisputably, the Services provided by the petitioner would fall within the scope of the definition of the term export of service under Section 2(6) of the IGST Act. The conclusion of the Adjudicating Authority that the services covered under Section 165(105)(zzb) of the Act were excluded from the scope of Export of Taxable Services under Rule 3(1) of the Export of Service Rules, 2005 is, plainly, erroneous. The learned CESTAT has rightly concluded that all services except those specifically mentioned in Rule 3(1) of the Export of Services Rules, 2005 are covered within the scope of Export of Taxable Services. The Adjudicating Authority had clearly misread the said Rule. The present petition does not raise any substantial question of law - Appeal dismissed.

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• Central Excise

• 2023 (7) TMI 718
  Maintainability of appeal - respondent herein has undergone the process of resolution under the provisions of the IBC - HELD THAT:- Having regard to the dictum of this Court in GHANASHYAM MISHRA AND SONS PRIVATE LIMITED THROUGH THE AUTHORIZED SIGNATORY VERSUS EDELWEISS ASSET RECONSTRUCTION COMPANY LIMITED THROUGH THE DIRECTOR ORS. [ 2021 (4) TMI 613 - SUPREME COURT] , the statutory dues owed by the respondent to the appellant (Department) shall no longer be the subject matter of adjudication, as it has stood extinguished. Appeal disposed off.

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• 2023 (7) TMI 717
  Valuation - bought-out items are not entered in the factory, and credit not claimed - inclusion in the assessable value or not - HELD THAT:- There is no case for adding the value in the assessable value and hence no proceeding need be initiated in the form of a show cause notice, it is found that for the previous period, in respect of which this appeal arises, the stand of the Department cannot be contrary to what has been stated above. Hence, we do not find any merit in the appeal. The Civil Appeal is dismissed.

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• 2023 (7) TMI 716
  Waiver of duty under Section 11D of the Central Excise Act, 1944 - duty attributable to Ethanol is not shown and recovered separately in the invoice and it s composite cum duty price - HELD THAT:- On the plain reading of section 11D of the C.E. Act, it is clear that sub-section (1) of Section 11D ordains that notwithstanding anything to the contrary contained in any order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made thereunder, every person who is liable to pay duty under C.E. Act or the rules made thereunder, has collected any amount in excess of the duty, assessed or determined and paid on any excisable goods under C.E. Act or the rules made thereunder from the buyer of such goods, in any manner as representing duty of excise, shall forthwith pay the amount so collected to the credit of the Central Government. Whether any of the ingredients of the provision are attracted in the present case? - HELD THAT:- It is clear that in the present case, the blending was undertaken in the licensed premises and the blended goods were cleared from the licensed premises. The product was subjected to strict control and orders issued by Central and State Government from time to time under the Motor Spirit and High Speed Diesel (Regulation of Supply Distribution and Prevention of Malpractices) Order, 1998 where under the quality and specification of the Motor Spirit was to strictly monitored and complied. Also at the Vashi Terminal where the duty paid Motor Spirit and Ethanol were received and where after blending the same, EBP was generated, the respondent had carried out the tests and 9 out of 15 tests which indicted that it conformed to the BIS 2796:2000 specification and the Control Order, 1998. Only after such procedure as to verification of the compliance under Control Order 1998, the respondent had cleared/sold the said goods to their customers similar to what other Refineries/terminals did. The Tribunal has also rightly observed that it could not lost sight of the fact that the respondent was a Public Sector Undertaking and on many occasions, in absence of facilities at Government Laboratories, the tests conducted in well equipped laboratories are accepted by the department for classification purposes under the Tariff Act. For such reason, the test reports on EBP at Vashi Terminal could not be brushed aside unless contrary test result was produced by the revenue is the observation of the Tribunal. Insofar as the applicability of Section 11D of the C.E. Act to the facts of the present case are concerned, admittedly the Vashi terminal of the respondent received duty paid Motor spirit from its Refinery and also duty paid ethanol, which was blended in the ratio of 95:5 at the time of clearance from the Vashi unit to the customers in tankers. The price per kilolitre of EBP was similar to the price charged by the respondent for unblended motor spirit to the customers. In the invoice the duty paid on motor spirit (EBP) was not shown separately attributable to Motor spirit and Ethanol, but the sale price of EBP was a composite inclusive of duty. Thus, the price charged was inclusive of duty, and the duty attributable to Ethanol was not shown and recovered separately in the invoice, the same could not be recoverable under Section 11D of C.E. Act. This is a case in which the revenue could not show that the respondent after blending ethanol with duty paid motor spirit collected amounts separately, mentioning the duty on ethanol in the invoices, but the same was not credited to the Government. In such situation, Section 11D of C.E Act was certainly not attracted as the crucial requirement to attract Section 11D was certainly not being fulfilled for the revenue to invoke Section 11D of the C.E. Act. There are no merit in the appeal - appeal dismissed.

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• 2023 (7) TMI 715
  Interest on an asserted delay in disbursal of refund - petitioner alleges that the order of refund was never communicated to it and that despite repeated reminders, the respondents failed to apprise the petitioners of the status of its claim for refund constraining it to institute the present writ petition - Section 11B read along with Section 11BB of Central Excise Act - HELD THAT:- The Court, at the outset notes, that Section 11B(1) in clear and unambiguous terms contemplates the making of an application for refund being made by any person claiming refund of any duty of excise and interest paid on such duty. The claim of refund insofar as the petitioner is concerned arose in the backdrop of the order in original coming to be set aside in appeal. The petitioner appears to have made an application for refund ultimately and only after the departmental appeal before the CESTAT came to be dismissed. It is deemed apposite to observe that the mere pendency of an appeal or an order of stay that may operate thereon would not detract from the obligation of any person claiming a refund making an application as contemplated under Section 11B(1) within the period prescribed and computed with reference to the relevant date - it is observed in light of the indubitable principle that an order of stay that may operate in an appeal does not efface the demand or the obligation of refund that may have sprung into existence. It merely places the enforcement of the order appealed against in abeyance. The order of stay would, in any case, be deemed to have never existed once the appeal comes to be dismissed. The subject of interest on delayed refund which is governed by Section 11BB itself prescribes the starting point for payment of interest on delayed refunds to be the date when an application under Section 11B(1) is received. On a conjoint reading of Sections 11B and 11BB of the 1944 Act, therefore, the irresistible conclusion arrived at that interest on delayed refund is clearly dependent upon the making of a formal application as stipulated by Section 11B of the 1944 Act. The distinction between Sections 11B and 35FF is also evident when one bears in mind the language employed in the latter and which stipulates that interest would commence from the date when the amount deposited by the appellant under Section 35F is required to be refunded consequent to an order passed by the Appellate Authority. Section 35FF thus indicates that interest would commence from the date of the order of the Appellate Authority as distinct from the making of an application which is prescribed to be the starting point insofar as Section 11BB of the 1944 Act is concerned. In eBIZ [ 2016 (9) TMI 1405 - ALLAHABAD HIGH COURT] , the Allahabad High Court was not dealing with a claim for refund of duty but an amount deposited in the course of investigation. The High Court further went on to hold that even in the absence of a statutory provision if it be found that tax or duty had been wrongly collected, it would be liable to be refunded. There cannot be a dispute with regard to the aforenoted general proposition. The instant writ petitions shall stand disposed of.

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• 2023 (7) TMI 714
  Fraudulent passing of CENVAT Credit - fake invoices - non-functional/non-manufacturing unit - reliance placed on the statement of the witnesses without first cross examining them - entry not made in RG-1 register - suppression of facts or not - Confiscation of seized goods u/r 25 of the Central Excise Rules, 2002 - penalty u/s 11 AC (1)(c) of the Central Excise Act, 1944. Reliance on the statement of the witnesses without first cross examining them - section 9D(1) of the Central Excise Act, 1944 - HELD THAT:- The officers of Preventive Branch visited the unit of the appellant on 14.3.2016 and recorded the statement of the Guard, Technical Operator on the same day, thereafter statement of the Proprietor Shri Mohit Gupta and the Accountant Shri Avirag Jain was recorded on 28.3.2016 and 6.4.2016 respectively. The show cause notice was issued on 12.9.2016 , however the appellant did not submit any reply in response thereto and subsequently when the case was fixed for personal hearing on 16.2.2018, 20.2.2018 and 23.2.2018 neither appellant nor his representative appeared and hence the case was proceeded ex parte by the adjudicating authority. When the appellant had chosen not to participate in the proceedings, there was no scope to call for the witnesses for cross examination - the appellant have to be blamed for the violation alleged by them. Secondly, the witnesses examined are not any third parties but the proprietor of the company and their paid employees being the Accountant, Technical Operator and the Guard who are actually aware of the working of the unit. The evidentiary value of their statement is not lost for the reason that the same could not be proved on cross examination. Considering the decision of Delhi High Court in J K CIGARETTES LTD. ORS. AND M/S. GTC INDUSTRIES LTD VERSUS COLLECTOR OF CENTRAL EXCISE ORS. [ 2009 (8) TMI 64 - DELHI HIGH COURT] wherein it had been observed that right of cross examination can be taken away, I am of the considered opinion that test of cross examination in the given circumstances be superfluous. Consequently, the contention of the appellant that no opportunity has been granted to cross examine the witnesses needs to be rejected. The next contention made by the learned counsel for the appellant is that merely because an entry could not be made in RG-1 register, the said goods cannot be termed as unaccounted - HELD THAT:- On examining the case records, it is found that it is not a simple case of not accounting the goods in the accounting register but a deliberate attempt to mislead the department, particularly in view of the facts which came to light during the visit to the factory premises as referred to above. Here on the basis of an intelligence that the assessee is involved in fraudulently passing the Cenvat Credit through fake invoices without manufacturing the goods, the unit was kept under surveillance and during the visit by the officers of Preventive Branch, lead ingots weighing 1926kgs valued at Rs. 231120/ were found unaccounted as compared to the recorded balance shown in their statutory records. The learned adjudicating authority rightly observed that from the categorical admittance of non-accountal of their main raw material, i.e. lead ingots, it is established that the assessee was indulging in suppressing the production of finished goods and clearance of finished goods with fraudulent intention of passing the Cenvat Credit in contravention of the provisions of Rule 4,8,10 11 of Central Excise Rules, 2002. The installation of the two furnaces, which are not in use and similarly the D.G. set is only to give a deceptive picture of manufacturing activity. It is nothing but a camouflage with fraudulent intention to avail the Cenvat credit without accounting for the goods. The act of the assessee and the modus operandi adopted was with intent to avail undue benefit which is nothing but playing fraud on the department. It is a settled principle of law that fraud vitiates all solemn acts. The appellant has now taken a stand that the statements recorded were taken under threat or coercion and hence the same cannot be relied upon. The said contention is to be rejected outrightly as the same appears to be just an afterthought as it has never been taken earlier. If the statements were taken under threat or coercion, those persons could have taken objection and retracted those statements at the earliest point of time, however, no such steps were taken in that regard. Confiscation of goods - no evasion of duty on account of fraud, collusion, wilful mis-statement, suppression of facts or contravention of provisions of rules with intent to evade payment of duty - HELD THAT:- The goods were brought in the factory premises without having proper invoices/documents with intent to clear them clandestinely. During the visit, the said goods were seized as no record was found to be maintained. Further, the modus operandi of the appellant as revealed from the statement made by the Accountant, Shri Aviraj Jain that the goods purchased from the market were entered in the finished goods register and also entered the same in the register at the time of sale; clearly shows that the manufacture was shown only on the paper. In the entirety circumstances, the lead ingots seized were rightly confiscated and the redemption fine as well as the penalty imposed under Section 11 AC of Central Excise Act read with Rule 25 of Central Excise Rules, 2002 is absolutely justified and no interference is called for. There are no substance in the arguments advanced by the learned Counsel for the appellant - Appeal dismissed.

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• 2023 (7) TMI 713
  Interest payable on differential duty - short payment of duty - inter-unit transfers - recipient units captively consumed the goods in further manufacture of their finished dutiable goods - revenue neutrality - HELD THAT:- Admittedly the Appellant has correctly assessed the value on which duty was paid as the goods were transferred to their sister unit under same management. The said payment of duty is also in accordance with Circular No. 692/8/2003-CX dated 13.02.2003 read with Trade Notice No. 171/2003 dated 26.08.2003 issued by the Hyderabad Commissionerate. Thus, the Appellant has paid the correct duty as per the scheme of the Act read with the Rules - further no case of short payment of duty is made out. It is only when the Appellant obtained fresh cost certificate for the next six months period, and found that there is some escalation in the cost, has suo moto deposited the differential duty though they were not under obligation to pay any additional amount. Further, under the facts and circumstances, whatever duty the Appellant would have paid was available to their sister unit as Cenvat credit. Thus, the situation is wholly revenue neutral. Impugned order set aside - appeal allowed.

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• 2023 (7) TMI 712
  CENVAT Credit - input services or not - services availed for setting up of a factory - scope of Rule 2(l) of the CCR, w.e.f. 01.04.2011 - HELD THAT:- The definition of input services was amended w.e.f 1.04.2011, wherein the words setting up of the plant available in the earlier definition has been specifically excluded. Hence, the department contended that the Appellant was not eligible for the input services credit used in setting up of the plant after 1.04.2011. However, the Appellant contended that the definition still covers input services used for setting up of the plant under the means part of the definition - the issue has been dealt by the Tribunal in the case of PEPSICO INDIA HOLDINGS (PVT.) LTD. VERSUS COMMISSIONER OF CENTRAL TAX, TIRUPATI [ 2021 (7) TMI 1094 - CESTAT HYDERABAD ] wherein it has been observed Although setting up the factory is not manufacture in itself, it is an activity directly in relation to manufacture. Without setting up the factory, there cannot be any manufacture. Service used in setting up the factory are, therefore, unambiguously covered as input services under Rule 2 (I) (ii) of the CENVAT Credit Rules 2004 as they stood during the relevant period (post 1.4.2011). The mere fact that it is again not mentioned in the inclusive part of the definition makes no difference. Once it is covered in the main part of the definition of input service, unless it is specifically excluded under the exclusion part of the definition, the appellant is entitled to CENVAT credit on the input services used. The subject input services used in setting up of the plant have a direct nexus with the manufacture of final goods. Therefore, these input services used in setting up of the plant are covered within the ambit of means clause of the definition of input service . Accordingly, even if the word setting up is specifically excluded from the definition of input service , w.e.f. 01.04.2011, such services used in setting up of the plant would still qualify as an input service as per Rule 2(l) of CCR, 2004. Appeal allowed.

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• CST, VAT & Sales Tax

• 2023 (7) TMI 711
  Default assessment of tax framed by the Assessing Authority - rejection of refund claim in respect of input tax credit (ITC) - rejection on the ground that the appellant had failed to establish the genuineness of the ITC on the basis of any documentary evidence - HELD THAT:- It is apparent from the orders passed by the Assessing Authority, the learned OHA, and the learned Tribunal that the assessee s challenge to the default assessment was rejected as the appellant had failed to produce any material to establish payment of ITC. This is clearly a question of fact and therefore not amenable to review in these proceedings. It is also material to mention that there is no dispute that the appellant had not produced relevant material before the Assessing Authority or the learned OHA or the learned Tribunal. Learned counsel for the appellant submits that the appellant was not required to produce any such material as the ITC could be verified from the returns and the forms filed online including the returns filed by the dealers from whom the appellant had purchased goods - the said contention is unsubstantial. The Assessing Authority is duly empowered to call for the records and to verify the ITC as claimed. The onus to establish the genuineness of the ITC rests with the assessee. It would not be open for the appellant now to raise any new challenge to the order passed by the Assessing Authority including on the ground that it had not been signed. This question does not arise from the impugned order passed by the Tribunal. The appellant has all along proceeded on the basis that the said order was passed by the Assessing Authority and had assailed the same on merits, which was considered by the OHA and by the learned Tribunal - It is well-settled that in case mala fides are alleged, the same has to be specifically pleaded with full particulars. The scope of the appeal, in the present case, is limited to examining the substantial questions of law that arise in the matter. There are no grounds to entertain the present appeal - appeal dismissed.

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• Indian Laws

• 2023 (7) TMI 710
  Dishonour of Cheque - compounding of offences - amicable settlement was arrived at - HELD THAT:- Hon ble The Supreme Court in the case of DAMODAR S. PRABHU VERSUS SAYED BABALAL H. [ 2010 (5) TMI 380 - SUPREME COURT ] has held that in case of dishonour of cheque, accused convicted, there is no stage prescribed for compounding of offence under Section 147 of the Act and it was observed that It is true that the application under Section 147 of the Negotiable Instruments Act was made by the parties after the proceedings had been concluded before the Appellate Forum. However, Section 147 of the aforesaid Act does not bar the parties from compounding an offence under Section 138 even at the appellate stage of the proceedings. In the peculiarity of facts and circumstances of the case and in light of the judgment in Damodar S.Prabhu, the petitioner is permitted to compound the offence. However, this Court is not inclined to accept the prayer for waiving off the compounding fee, but considering the mitigating circumstances of the petitioner, the same is reduced and she is ordered to deposit an amount of Rs.10,000/- as costs, with the Haryana State Legal Services Authority on or before 30.07.2023. The judgment of conviction/order of sentence recorded by the trial Court and affirmed by the appellate Court are hereby set aside and petitioner is acquitted of the charges framed against her. The revision petition stands disposed of.

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• 2023 (7) TMI 709
  Validity of promissory notes - promissory notes are executed for a valid consideration or not - entitlement for suit amount with interest - HELD THAT:- As far as the Negotiable Instruments Act is concerned, in view of the presumption available under Section 118 of Negotiable Instruments Act, every Negotiable Instrument Act is deemed to be drawn for consideration unless the contrary is proved - In the case on hand, the signatures found in the promissory notes are not disputed. However, the defendants raised a plea that promissory notes were not executed in favour of plaintiff but those promissory notes were handed over to Adeshwar Investments in respect of separate transaction. The said plea of the defendants is not acceptable to this Court. Therefore, it can be safely concluded that the plaintiff succeeded in proving execution of the promissory notes. Once, the plaintiff proves execution of promissory notes in his favour by preponderance of probabilities, he is entitled to press into service the statutory presumption under Section 118 of Negotiable Instruments Act. The place of execution and value of the promissory notes in words as well as in figures are written in different ink. However, merely because the name of the creditor and date of the instruments are filled up with a different ink, we cannot come to a definite conclusion that there is a material alteration in the suit promissory note vitiating is validity. First of all, the defendants have not made any specific plea with regard to the material alteration in his pleadings. Therefore, it is not open to them to make submission regarding material alteration without a plea. Further under Section 20 of Negotiable Instruments Act, a person who signs an inchoate document gives prima facie authority to the holder of the instruments to complete the same and make it as a complete Negotiable Instrument. Therefore, merely, because a different ink is used in respect of the name of the creditor and date of the instruments, we cannot come to a conclusion that the Negotiable Instrument is vitiated by material alteration in the absence of any plea or independent evidence in support of the same. A perusal of Section 269 SS of Income Tax would suggest that no person shall take or accept from any other person any loan or deposit otherwise than by the account payee cheque or account payee bank draft or by electronic mode when the amount of such loan or deposit is Rs. 20,000/- are more. Therefore, it prohibits a person who is taking or receiving the loan. Whether the prohibition is equally applicable to the lender of the amount is not very clear. In any event, in case of violation of Section 269 SS of Income Tax Act, the violator is liable to be proceeded against in accordance with law by the income tax authorities. Subject to such proceedings liable to be initiated by the tax authorities, the plaintiff is entitled to maintain a suit based on the Negotiable Instruments Act. By taking into consideration the above mentioned established facts and statutory presumptions, this Court comes to a conclusion that the plaintiff proved its case by preponderance of probabilities. The plaintiff is entitled to decree for recovery of money as prayed for. As far as the rate of interest is concerned, having regard to the fact that the suit transaction is a commercial one, this Court deems it appropriate to direct the defendants to pay the principal amount of Rs. 2,49,00,000/- with interest at the rate of 12% per annum from 19.06.2015 to date of actual realization of the amount - Issue decided in favor of plaintiff.

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